Legendary oil investor T. Boone Pickens, who made more than $1 billion in 2006 by betting on rising oil prices, said he expects oil prices will hold near or above $100 a barrel for the rest of this year.
He added that he made "a mistake" when his fund shorted the energy market at the beginning of this year as crude prices surged to new peaks.
Pickens, who heads the BP Capital hedge fund, told CNBC television he thinks oil will "hang around" $100 in the second quarter and that "in the second half we'll see above $100" because of strong fundamentals.
"I still am a fundamental player and I'm going to play the fundamentals until I'm told there's another way to evaluate the market," he said....MORE.
Here are our previous posts on T. Boone.
Monday, March 31, 2008
A couple days ago in response to an Environmental Capital post:
The Climate on the Street: More Banks Smell Money in Carbon
I made the point:
For the banks, a Trillion-dollar carbon market that they can help set the rules for is a Godsend.There is nothing else that can replace the income lost from the exposure of the CMO, CDO, ABCP, structured finance shell game. Even the Fed’s creation of a Fed Funds/Treasury carry trade would take so long to reliquify the balance sheets that the public would have time reflect on what has been going on, and would start hunting bankers and traders for sport.(emph. added)
Comment by Climateer - March 26, 2008 at 11:37 am
I was typing too fast, I was actually thinking 'discount window' but the principle is the same (if not the interest).
Today 24/7 Wall Street explains what I was babbling about and says:
Banks are going to the Fed and getting money at 2.5% and putting it onto their balance sheets
What do the big money centers do with the money? They make investments in high-yield instruments. Or, put it into their proprietary trading operations. A bank that takes in $10 billion could make a $1 billion return on that over the course of a year, perhaps more, by "playing the spread" on the dirt cheap cash from Bernanke & Company.
The game the banks are playing at the expense of tax-payers due to inexpensive money from the Fed is outstanding for investors who hold stock in the firms. It could be one of the best money-making opportunities that companies like Citigroup (NYSE:C), JP Morgan (NYSE:JPM), and Bank of America...MORE
I apologize to our long-suffering readers for the principle/principal play.
Sometimes I can't help myself.
Here's the post with "Music to hunt bankers by".
(pinstripes are not effective 'protective coloration')
Two stories, the first is from the Wall Street Journal:
First Solar (FSLR) has been one of the hottest stocks of the past 12 months. In 2007, this solar- panel manufacturer saw a 40-fold increase in profit, and euphoric investors have celebrated by pushing it to a recent $229 a share from a 52-week low of $51.50.
It wasn't too long ago that so-called clean-energy stocks like First Solar were considered fringe players. But as consumers and even chief executives grow tired of paying record gas and oil prices and contemplating the ramifications of global warming, there's been a sea change in the attitude toward these alternative investments.
The exchange-traded funds industry has long seen that potential. Over the past three years, it's launched a half-dozen funds that give shareholders exposure to solar and wind companies, energy-technology firms and infrastructure plays. For the most part, these funds have been decent investments. PowerShares WilderHill Clean Energy (PBW), the grandfather of the group, returned an impressive 59% last year.
These funds have not been immune to the economic concerns weighing on the stock market, however. After its impressive gains last year, PowerShares WilderHill is down about 28% this year, while PowerShares Global Clean Energy fund (PBD) has fallen 19% and Market Vectors Global Alternative Energy (GEX) is down 21%
Nevertheless, the industry is still attracting a wide range of investors. Some, like J.D. Steinhilber, founder of Agile Investing in Nashville, have built small 3% positions to help diversify larger portfolios....MORE
And, from Hard Assets Investor:
Here Come The Suns
With the tremendous interest in all things "green" and "clean," it was just a matter of time before ETF and index companies would start to carve out thinner slices of the clean tech universe. In fact, there are two ETFs in registration that target a fast-growing segment of the clean tech market: solar energy.
This month, Claymore and Van Eck registered solar energy ETFs. Claymore's Global Solar Energy ETF will track an index developed by Chicago-based Melvin & Company. The index will be composed of approximately 25 stocks selected "based on the relative importance of solar power within the company's business model." The stocks in the index are involved in some aspect of the solar power business, from gathering raw materials to manufacturing equipment to selling solar energy. Components will be weighted based in part on the importance of solar energy to their business model, so that pure-play companies get more weight than conglomerates that dabble in solar energy.
Van Eck's Market Vectors-Solar Energy ETF will track the Ardour Solar Energy Index. Expected to launch in April 2008, the ETF will contain approximately 25 stocks, selected depending on the companies' revenues, liquidity and market cap. The list of companies isn't available, but the roughly 25 stocks will be taken from Ardour's Global Composite Index, an alternative energy index comprised of 118 stocks. Both ETFs will likely have familiar names, such as major solar energy companies like First Solar (NASDAQ: FSLR), Sun Power (NASDAQ: SPWR), Evergreen Solar (NASDAQ: ESLR) and LDK Solar (NYSE: LDK).
Bullish On Solar
Van Eck and Claymore are counting on solar to generate strong investor interest in the coming years, and for good reason. There seems little doubt that the solar-power industry has a "sunny" future. In January's Scientific American, "A Solar Grand Plan" proposes a way for the U.S. to generate 69% of its electricity and 35% of its total energy from solar power by 2050. Noted technologist and inventor Ray Kurzweil is even more bullish, forecasting that solar will meet 100% of our energy needs in 20 years. Solar currently generates far less than 1% of our energy needs. ...MORE
From the AP via Yahoo:
Ethanol stocks fell Monday as a government survey showed that corn supplies will be tighter this year, indicating higher costs for ethanol producers.
Farmers are expected to plant 86 million acres of corn this year, the Department of Agriculture predicted Monday, down 8 percent from 2007, when the amount of corn planted was the highest since World War II. The report is based on sample surveys of 86,000 farm operators in the first two weeks of March....MORE
From the WSJ's MarketBeat blog:
The U.S. Department of Agriculture’s report on planting intentions proved to be the news event many were expecting, and the significant selloff in soybeans and soybean meal that has ensued has dropped prices to “limit down” status (that is, the furthest down they can go on the day).
As a result, grains traders are in the market selling other commodities, including corn, which had rallied on the bullish numbers released by the USDA. “There have been a lot of long liquidations,” says Elaine Kub, grains analyst at DTN in Omaha. “I have a feeling as soybeans have been locked limit down that we’re seeing spillover pressure.”
...The relevant soybean contract is the November one traded on the CME — the crops this report is talking about will be available in November. That contract was lately at $10.894 a bushel, down from $11.594 a bushel, or 70 cents, the daily limit. Soybean meal has also reached its limit, with the front-month contract falling to $322.30 per 100 tons from $342.30....
U.S. farmers will plant more soybean and wheat crops this year after prices reached records, while corn and cotton acres will drop, the U.S. Department of Agriculture said.
The government survey showed growers will seed 74.793 million acres with soybeans, up 18 percent from 63.631 million last year, the USDA said today in a report. Spring-wheat planting will jump 7.8 percent, as corn planting drops 8.1 percent and cotton acres fall 13 percent, the USDA said.
Increased soybean and wheat planting may help refill dwindling inventories, while declining corn output may squeeze supplies available for ethanol makers, including Archer Daniels Midland Co. Prices for most farm commodities reached records this year on booming demand for food, fuel and animal feed.
``The acreage shift into soybeans and away from corn was larger than people expected,'' said Greg Grow, director of agribusiness for Archer Financial Services. ``The markets sense we now need to raise corn prices at the expense of soybeans,'' to increase the incentives for farmers to plant corn this year, Grow said.
Corn acres will fall more than expected, to 86.014 million, as growers make room for soybeans, the USDA said....MORE
This is way off-topic but it reminded me of something.
From the Front page of the Wall Street Journal:
Industry Giants Push Obesity Surgery
Medical-device makers, venture capitalists and surgeons are racing to turn a once-controversial weight-loss procedure into the next big thing in elective surgery....MORE
Ladies and gentlemen, The Ojays!!!!!
For the Love of Money
What a handy discography
Meanwhile, over at Bloomberg:
Merck Obesity Drug Helps Shed Pounds, Increases Irritability
From The Economist:
THE soaring price of rice and dwindling stockpiles of Asia’s staple food are causing anxiety across the continent. In particular the Philippines, a big, hungry country which cannot grow enough to feed itself, could be in trouble. The front pages of Manila’s newspapers scream about a “rice crisis”, as politicians float drastic solutions, such as forcing the country’s top 100 companies to take up rice farming. Farmers in Thailand, the world’s largest rice exporter, are delighted with the price surge, although some were this week said to be hiring guards to protect their valuable crops against “rice bandits”.
The president of the Philippines, Gloria Macapagal Arroyo, last month pleaded publicly with neighbouring Vietnam, the second-largest exporter, to guarantee supplies. The two countries signed an agreement on Wednesday March 26th apparently to do just that. But the various escape clauses that Vietnam insisted upon suggest it was more of a face-saving measure than a firm pledge. Vietnam and India, another big rice exporter, have recently announced export restrictions to try to curb soaring food prices at home. This will make it tough for poor, rice-importing countries, in Africa as well as Asia, to secure supplies....MORE
From the Financial Times:
Deutsche Asset Management, the $800bn fund unit of Deutsche Bank, plans to launch the world’s first private equity fund specialising in climate change, or green investments.
“We’re developing the product,” Kevin Parker, DeAm chief executive, told the Financial Times. “We are already the biggest climate change investors in the world. That has happened really in just the past 18 months.”
The move dovetails with DeAm’s commitment to climate change as a potentially huge investing trend and with its desire to develop more products in the higher-margin end of the asset management business....MORE
Fed eyes Nordic-style nationalisation of US banks. AND The Fed Needs to BUY Mortgage Collateral, Outright: Pimco
Two threads of the same tapestry.
Our regular readers know the Fed usually lends against high quality collateral, has recently expanded their definition of 'high-quality' and has had the option of outright purchases in their bag of tricks. It's a bit unsettling to see PIMCO calling for what the cognesceti call "Extraordinary Actions".
Mr. Evans-Pritchard can be a bit alarmist but we've found his reporting to be accurate enough that we've been linking to him for a year.
From The Telegraph:
The US Federal Reserve is examining the Nordic bank nationalisations of the 1990s as a possible interim solution to the US financial crisis.
The Fed has been criticised for its rescue of Bear Stearns, which critics say has degenerated into a taxpayer gift to rich bankers.
A senior official at one of the Scandinavian central banks told The Daily Telegraph that Fed strategists had stepped up contacts to learn how Norway, Sweden and Finland managed their traumatic crisis from 1991 to 1993, which brought the region's economy to its knees.
It is understood that Fed vice-chairman Don Kohn remains very concerned by the depth of the US crisis and is eyeing the Nordic approach for contingency options....MORE
...Q: We have seen the significant Fed easing that you expected at the December Cyclical Forum as well as additional credit facilities and some fiscal stimulus in the form of tax breaks. Will these responses be sufficient to contain this self-feeding process?
...So, in addition to the alternative credit facilities the Fed has recently provided, first to banks and then to broker-dealers, we expect the Fed to more aggressively use its balance sheet. They don’t just need to lend against mortgage collateral via enlarged Treasury auction facilities and term repo operations, they need to buy mortgage collateral outright. This is, at the margin, a quasi fiscal policy action, in that any losses the Fed were to take would reduce the seinorage rebates it pays the Federal government on the profits and interest generated by its portfolio. This makes it a politically difficult step for the Fed, but it is a step we think they will take, as the political climate evolves toward recognition that all tools must be employed.
HT: 1440 Wall Street who writes
...Deleveraging in the shadow bank system is leading to mispricing in high quality assets and Pimco is happy to accomodate the sellers who have no other choice.
Price discovery is a bitch, especially when your only option is to hit Bill Gross’ lowball bid.
If you are pressed for time, you can read the Cliffnotes version on Pimco’s commentary, summed up in the following sentence:
Until property deflation is stopped, nothing else is going to work in our economy.
Fair warning, reading their commentary will ruin your mood heading into the weekend.
The Nenana Ice Classic! "In 2007, 22 tickets split $303,272.00"!
From the website-
The Tanana River officially went out on April 27, 2007 at 3:47 P.M.Alaska Standard Time.
The jackpot was $303,272.00
"In 2007, 22 tickets split $303,272.00"!
But ya gotta hurry, tickets are only on sale through April 5, 2007.
Here's the website.
Here's the list of winning times and dates since 1917.
From EE Times:
Massachusetts Institute of Technology professor Ely Sachs has said he plans for a startup company called 1366 Technologies (Lexington, Mass.) to develop an improved silicon-based solar cell that can beat coal on cost efficiency.
The amount of energy that comes from the sun is 1366 watts per square meter at the surface of the earth. 1366 Technologies has secured $12.4 million in a first round of financing co-led by North Bridge Venture Partners and Polaris Venture Partners. Founder and CTO, Sachs, said the company would be combining innovations in silicon cell architecture with manufacturing process improvements to bring polycrystalline silicon solar cells to cost parity with coal-based electricity....
...Professor Sachs previously invented the string ribbon wafer technology, which is being commercialized by Evergreen Solar, a leading developer of solar energy products....MORE
From Red Herring:
Thin-film solar technology has generated a storm of interest in recent years. That's because advocates have ordained thin-film—which can be applied on glass, metal or flexible plastic and integrated with building materials—as the inevitable solar star of the future.
But 1366 Technologies, a startup spun out of research at the Massachusetts Institute of Technology, believes traditional silicon-based photovoltaic cells still show great promise. The company talks about creating electricity cheaper than coal. 1366's ambitions, however, haven’t made it out of the lab....
From the Hampton Roads Virginian-Pilot:
This isn't a joke.
It's the plot of a new commercial in the former vice president's fight against global warming.
And it was filmed at the 57th Street beach Wednesday.
Gore and his nonprofit agency, the Alliance for Climate Protection, are pitting odd couplings - think Sharpton and Robertson - in a series of public-service announcements to draw attention to the environment. The $300 million campaign is expected to launch next week, CBS News reported....
A witness said Sharpton, the grandiose civil rights voice in New York, sat on the left.
Robertson, the conservative preacher and Regent University founder, was on the right.
"It was like 'The Twilight Zone' seeing them sitting on the couch," said Bill Kelly, a special events coordinator in the city's resort office. "And then around the corner comes Al Gore."
From the Telegraph:
The credit crunch is exposing the masters of the universe as mere mortals after all, reports Louise Armitstead
Even for the affluent residents of London's Holland Park, the arrival in the area last year of Gerard Griffin, head of Tisbury Capital, was big news. Curtains twitched as a multi-million-pound refurbishment of his house began. Rather than buy furniture or even appoint an interior designer, Griffin and his wife Sarah commissioned top artists to produce original work specifically for their home.
Soon the Griffins boasted a dining-room chandelier by glass artist Deborah Thomas, two installations by potter-sculptor Edmund de Waal (including a complete room of more than 600 porcelain vessels), and an architectural version of a Morandi painting in the gallery by ceramist Julian Stair. It was, Mrs Griffin modestly told one visiting reporter, "simply an extension of collecting on a domestic scale".
To the neighbours, the house had been "hedged" - snapped up and spruced up by a rich hedge fund manager. These flash Wunderkinder are branching out, and surpassing toffs, lawyers and even footballers' wives with their reputation for ostentatious opulence.
As head of Tisbury, a $2.7bn (£1.35bn) event-driven fund founded in 2003, Griffin was the archetypal hedge fund manager: aggressive, arrogant and nearly always right....
You can probably guess where this is going, here's the rest.
HT: Naked Capitalism
Credit Suisse and its clients will invest at least $300 million in renewable energy companies through Hudson Clean Energy Partners, the bank said on Thursday....MORE
Friday, March 28, 2008
Tell me about it. In a prior post I relayed the advice one of my mentors gave me:
The alt/renewable energy sector offers all kinds of ways to lose money, betting on the wrong horse, betting on the right horse in the wrong part of the race, misunderstanding the politics, misperceiving human nature and betting on the wrong jockey; there's a loss creation method for every taste.
"There are a thousand ways to lose money in the markets. When you learn one, try to avoid repeating it".
(I'll stop with the horsey talk, The IHT started it with that headline)
Here's a story from the International Herald Tribune, well worth a read:
The buzz words "climate" and "change" have been appropriated by the funds industry to market a new line of "green" equity products. But is this investment concept hot enough to coax investors back into markets that are buckling under more pressing financial concerns?
Allianz, Schroders, HSBC, DWS and Virgin are among the money managers who figure that climate change should influence our investment decisions. Their message is simple: Companies that profit from global warming will make more money as the problem tightens its grip. Conversely, companies that refuse to face up to their green responsibilities will run the risk of climate change lawsuits and profit downgrades.
Behind the plain talk lies a complex challenge: picking stocks that are best placed to deliver exceptional returns. Climate change cuts across regions, sectors and market capitalization - an investment universe that encompasses from 350 to 1,500 stocks, depending on the screening criteria adopted by stock selectors.
Naturally, fund promoters are at pains to point out that climate change is a "megatrend" that will weather the vagaries of short-term market disruptions and deliver superior returns. They all pursue different investment strategies to make this point.
Schroders Global Climate Change Fund, for instance, is heavily invested in fossil fuels and such resources as food and farming, as well as the core clean energy and transport areas. Like many other climate change investors, the Schroders portfolio manager, Simon Webber, has adopted an approach that skirts so-called ethical investing by buying stocks in the nuclear, natural gas and oil industries....MUCH MORE
First Solar: Materials for Solar Photovoltaic Cells II: Tellurium, Not So Rare After All (FSLR; VNP.TO)
From Resource Investor:
In reviewing the English language articles, which discuss the supply and demand of tellurium for manufacturing cadmium telluride photovoltaic solar cells, I noticed a persistent error in the interpretation of U.S. Geological Survey data on tellurium fundamentals and usages, which seems to now pervade all such discussions. I need to emphasize that those who utilize USGS data are reading too little into the numbers, rather than too much.
Based on the discussion following I now believe that there may be enough annual production of tellurium to build and maintain a solar electric power industry, which can become an economically important component of the infrastructure, total supply and accessibility of electric power generation on a stand-alone basis; I now believe that there is much more tellurium produced each year than I thought or than is commonly reported. The difference increases the credible output of tellurium by a factor of between two and four, but the global total annual production may still be less than 500 tonnes a year....
...My conclusion is that even if we just reduce the 2007 potential 50% production of tellurium contained in copper by half and estimate that only 25% of the potential supply is recovered we then must recognize that the world today is most likely producing at least 500 tonnes per annum of tellurium or four times the commonly stated figure in supply reports!
Before the cadmium telluride PV solar cell enthusiasts begin rejoicing, I must ask some more questions. Even if there is enough tellurium produced to meet the demands of a growing cadmium telluride thin film using segment of the solar electricity industry, isn’t there still a major bottleneck? Isn’t there a serious dearth of capacity to produce the electronic grade tellurium needed by the PV solar cell manufacturing industry, and doesn’t the building of new capacity to produce electronic grade tellurium depend on the availability of skills, equipment and the time it will take to get the purification capacity to match the production capacity hoped for? In addition isn’t it time now for everyone to take a breather and ask the very important question: Are the numbers I have estimated and calculated here today correct?
One set of questions for the investment community. If the demand for tellurium is not immediate, and if the supply, is much more than has been stated, so that the supply exceeds the current demand, then why has the price of tellurium gone up so fast and so far?>>>MUCH MORE
Sounds like a buy rec. on 5N Plus.
Our earlier posts on the phenomena are below, here's the Financial Times story:
As India’s voracious appetite for gold wanes, producers of the precious metal are taking heed.
Indian consumers buy about 25 per cent of the world’s gold, the vast majority of which is
imported, making the country the largest market for the metal.
Globally, investors have poured into gold, seeking refuge from the deflating dollar, which has hit record lows against the euro. Fears of an economic slowdown in the US, sky-high oil prices, and fallout from the subprime crisis have driven demand for gold as a safe haven.
But with the recent volatility in gold prices, which have hit more than $1,000 per troy ounce, investors have become nervous and sales of gold in India have fallen sharply. Demand for gold in India plummeted 64 per cent year-on-year in the fourth quarter after growing 40 per cent in the first three quarters of last year....MORE
HT: Naked Capitalism
In January we had: Gold loses its shine as high price hits Indian demand which referenced a post from last year that told the story of my first exposure to the "Indian Ladies" indicator:
EU Emission Caps, Kyoto and Three Ancient Civilizations
As a side note, in December 1979, as silver was making its historic run, an old Jewish trader told me he was lightening up on Ag.
When I asked why he said "I hear the Indian ladies are taking their bracelets off and they've been trading it longer than I have".
On a freezing day in March 2007, Nassim Taleb walked into a conference room at Morgan Stanley's Manhattan offices on 47th Street and Broadway to address a group of the firm's risk managers. His message: Your models don't work.
Using a whiteboard to scribble out his calculations, Taleb, now 48, began one of his rants, this time against stress tests -- Wall Street lingo for examining how a market rout will play out. Stress tests are inherently risky because they ignore rare but potentially devastating events, Taleb said.
``Past shortfall doesn't predict future shortfall,'' the options trader turned best-selling author recalls telling the assembled group of about 40. The risk managers, part of a tribe of mathematical model makers known in the finance world as quants, stared back at him blankly, and a debate ensued, according to people who were there....
...Taleb has made enemies, too. In August, The American Statistician, the quarterly journal of the American Statistical Association, came out with a special Black Swan issue that published a series of critical reviews alongside an article by Taleb.
``He characterizes statisticians as people who blindly assume things, and nothing could be further from the truth,'' says Peter Westfall, the journal's editor and a professor of information systems and quantitative sciences at Texas Tech University in Lubbock.
Even his one-time colleagues disagree with him. Robert Engle, a Nobel laureate in economics who teaches at New York University's Stern School of Business in Manhattan, says Taleb's book ignores a mass of literature on rare events called extreme value theory, which is often used to assess risks in insurance as well as finance.
``He's reflecting an opinion that financial markets are sort of out of control,'' Engle says. ``I think a lot of mistakes are made, but I don't think he helps us understand the mistakes.'' >>>MUCH MORE
Fed May Rethink Greenspan's Hands-Off Approach Towards Bubbles
A word of explanation about our Iceland post* from a couple days ago. In September the WSJ's Energy Roundup blog (now refocused as Environmental Capital) had this post:
Glitnir Goes Geothermal
Steve Gelsi has this report on plans for a big investment in geothermal projects:
Glitnir said it’s planning to play a visible role in an estimated $40 billion financing push behind geothermal energy projects in North America by 2025 as the Nordic financial group eyes growth in the business of harnessing heat from the earth to produce electricity. (This paragraph has been corrected; see below.)
Taking aim at a competitive financing market for alternative energy deals, Glitnir will attempt to outflank the likes of Credit Suisse, General Electric, Siemens and others by focusing on geothermal.
“There’s competition on all angles…the challenges are numerous, but the opportunities huge,” said Arni Magnusson, managing director of sustainable energy for Glitnir. “We haven’t seen any big banks with a singular interest as we have. We’ve decided to narrow our focus down to geothermal, and the U.S. market is on top of the list.”...Yesterday the WSJ's MarketBeat blog said:
...Iceland is one of those sexy stories that people like to focus on — country-specific meltdowns, where interest rates skyrocket and investors pull funds on worries about strength of a particular nation’s finances. Iceland’s central bank recently boosted the key interest rate to 15% as foreigners have pulled back from profitable trades on the high yields available in that country due to concerns about the banking sector there. The frigid Scandinavian nation’s largest banks have incurred large debts as a result of financing economic activity through massive borrowings, and they’re encouraging lending through higher rates in order to finance activity there. It’s the kind of thing that can get repeated from time to time in other markets where there are high deficits and high interest rates, such as Turkey and Eastern Europe. This may not be more than a country-specific event, though.
Still, as global risk appetites fall, investors get wary, which is what has happened in Iceland, where the Icelandic krona has fallen by 20% against the euro this year. “The more sophisticated investors had been getting out earlier, and then finally the pain became too much for less sophisticated as well,” says Clyde Wardle, emerging markets currency strategist at HSBC Bank USA.
And this morning we read in the Telegraph:
Iceland contagion may spread far and wide
As Iceland goes, so go the Baltics, the Balkans, Hungary, Turkey, and perhaps South Africa. All are living far beyond their means, plugging the gaping holes in their accounts with fickle flows of foreign finance. All have let credit grow far above the safe "speed limit", some exceeding 50pc a year.
For Iceland, the high-wire act of the last five years may have finally reached its limits. The central bank was forced to raise interest rates to 15pc this week in an emergency move to halt the collapse of krona, which has fallen 18pc since mid-March.
The country's all-conquering banks - led by Kaupthing, Glitnir, and Landsbanki - have pushed the asset base of the Icelandic banking system to a world record of eight times GDP, tapping the global capital markets to launch Viking raids across Britain, Scandinavia and beyond....
Reading Mr. Evans-Pritchard's Balkan reference, you can almost hear a muted drumbeat of 1914. Spooky.
Everything is connected. Mr. Gongloff's Energy Roundup post had a musical reference that led to my riffing on Icelandic bands in the post Oil Markets, Metal Bands and Where are the Proceeds from the Live Earth Concerts? :
...The AA story apparently got the WSJ.com's Markets Editor thinking of metal bands,
Alcoa is currently operating the Fjardaal smelter at Reydarfjordur (great band name: Fjardaal Smelter — ed.)leading me to comment on the only Icelandic metal band I know:
ed. you missed a calling as a naming consultant. For the Goth/Metal crowd: http://www.myspace.com/thorshamrariceland Not to be confused with Iceland’s answer to the Fab Four; Thorshammers. Probably would have gone further as Fjardaal…
*Iceland in Trouble, Central Bank Raises to 15%
Japanese consumer electronics maker Sharp Corp said on Thursday it would spend 72 billion yen ($729 million) to build a new solar cell plant in Sakai, western Japan.
Sharp said in July it would build the world's largest solar cell plant by March 2010, along with a 380 billion yen liquid crystal display (LCD) panel plant, but it did not disclose the size of capital investments for the solar cell factory....MORE
Wednesday, March 26, 2008
Short day today. With the S & P down 14 , the DJIA down 133 there is some green on the screen:
FSLR: + $4.22
MOS: + $2.97
MON- + $1.61
POT: + $2.96
PBW: + + $0.14
Fannie Mae and Freddie Mac are down again.
Tomorrow, how to turn $8.00 into $ One hundred fifty million.
We love our readers.
From an email this morning:
...if you want to get another post out of Japan's suggestion of 2005 as the "base year" for a post-Kyoto agreement, I'll be the live shill [! -ed.].Well, since you asked...
Why is the base year important?
(The reference is to this post from yesterday)
For the British the 1990 base year allowed them to get credit for their bringing North Sea gas onstream for electricity generation. Although gas produces less CO2 and Maggie Thatcher was one of the first world leaders to develop policy incorporating global warming theory, that's not why they switched to gas. The North Sea oil and gas fields were being developed* before Kyoto was a gleam in Maurice Strong's eye.
This brings up the crucial concept of "additionality". Simply stated, you don't get credit for doing something you were going to do anyway.
For the Germans, 1990 meant they would get credit for shutting down the amazingly inefficient east-bloc heavy industry. Reunification occurred October 3, 1990 when East Germany joined Bundesrepublik Deutschland. Again the concept of additionality says they shouldn't have gotten credit for doing something they were going to do anyway.
The U.S. agreed to support this bald-faced B.S. if Europe would agree to enshrine carbon trading* as one of the approaches favored by the Protocol.
The Japanese on the other hand took a lot of energy-efficiency measures in the 1980's (they are, after all, a resource-poor country) and got no benefit from a date starting from their new, lower, base.
The 1990 base year has an important U.S. climate legislation angle. USCAP has adopted 1990 in their global warming manifesto. This would allow USCAP members to be credited for a much higher base of emissions to judge reductions against. For example, USCAP member Dupont sold their nylon business, reducing their carbon footprint immensely. If they fail to get credit for that, the fall-back position is to claim credit for changes made in manufacturing technology which were implemented as cost-saving measures. Again, giving credit for something that was going to be done anyway violates the additionality concept.
USCAP members also want credit for things they've done that are essentially P.R. branding, thus deriving the P.R. accretion to shareholder value and a higher base to measure emissions from.
One of these days I'll get around to posting on the "Credit for early action scam".
I'll take off my professorial hat and promise not to do another policy-wonk post.
*See: Enron; J-block; Teeside; etc.
Here's a treasured Enron link, for others, use the 'Search Blog' feature.
If you have an academic or research interest (or just want to indulge in a bit of "how did it go so wrong" voyeurism), the Trampoline Enron Explorer is a lot of fun:
In October 2003 the US Federal Energy Regulatory Commission placed 200,000 of Enron's internal emails from 1999-2002 into the public domain as part of its ongoing investigations. The archive offers an extraordinary window into the lives and preoccupations of Enron's top executives during a turbulent period. Read more about Enron's demise on Wikipedia.
Trampoline engineers used this data as testbed during development of the company's SONAR technology. The result was so fascinating we decided to open it up and allow anyone to dig in. The Enron Explorer lets you investigate the actions and reactions of Enron's senior management team as the noose began to tighten.
How to use it
Click a name in the panel below to open an Enron executive's mailbox. Read any email by clicking the subject. Enron Explorer analyses each person's main contacts and the themes they're talking about. Launch the Visualiser to see each person's social network (Java required). Click a contact in the Visualiser to shift the focus to them and load their mailbox, contacts and themes. Click a theme to access all relevant emails.
French utility Suez said on Tuesday it was studying building a thermoelectric complex in central Chile, at least six hydroelectric plants in the south and two wind farms.
Manlio Alessi, president of Suez Energy Andino told reporters in the northern city of Calama that investment in the projects could total around $3 billion.
He said Suez had already bought a 1,000-hectare (2,500-acre) plot near the central city of La Serena for its "Barrancones" thermoelectric project, where it aims to build three units each with a capacity of 180 megawatts.
"The investment is similar to that in our other thermal power plant. Between $800 million and $1 billion," Alessi said during a presentation....MORE
Tuesday, March 25, 2008
This is hugely important for those who follow the minutiae of where the money in the carbon trade is. The Al Gore/Enron-backed deal at Kyoto was that the U.S. would support Europe on their insistence of 1990 as the base year (Dash for gas, Fall of the Wall) in return for Europe's agreeing to carbon trading. The Japanese didn't get much out of it (other than memorializing one of their cities in the name of the Protocol) and in fact will be paying their way out of their commitment, big time.*
Japan thinks 2005 would be a "fair" base year for calculating cuts in greenhouse gas emissions under a post-Kyoto climate pact, a senior trade and industry official said on Monday.
Japan has rejected the idea of keeping 1990 as the base year for emissions cuts for a new global pact to replace the Kyoto Protocol after 2012, saying it was unfair to Japanese industry, which had made energy efficiency investments two decades ago.
But Tokyo had not specified what the new base year should be.
Takao Kitabata, vice minister at the Ministry of Economy, Trade and Industry (METI) told a news conference that 2005 would be "fair", a spokesman for the ministry said.
The proposed change in the base year would likely be opposed by the European Union, which has pledged to cut greenhouse gas emissions by 20 percent by 2020 from 1990 levels....MORE
*It's going to cost Japan $Billions to buy their way out of their 2012 commitments and hundreds of billions going forward:Japanese households and businesses could end up paying more than $500 billion to cut greenhouse gas emissions by 11 percent over the next decade, the trade and industry ministry said Wednesday.
The report mapped out the changes that consumers and industry would have to make in order to cut emissions of carbon dioxide and other gases blamed for global warming below 2005 levels by 2020.
The forecast, by the Ministry of Economy, Trade and Industry, comes as Japan is struggling to meet obligations under the Kyoto global warming pact to cut greenhouse gas emissions by 6 percent under 1990 levels by 2012....
From the Christian Science Monitor:
Everyone it seems has been investing in green energy – from Google to ExxonMobil. But this year the booming sector is suddenly in a serious funk. So is this time to get out – or jump in and snap up some long-term winners? To find out, the Monitor's Laurent Belsie recently talked with three experts who closely follow the field: Matt Patsky, portfolio manager of the Winslow Green Growth Fund, Paul Hilton, director of advanced equity research at Calvert, and Eric Becker, portfolio manager with Trillium Asset Management. Here are edited excerpts of their conversation:
Matt, you've had the No. 1 fund of all small-cap growth funds over the past five years. This year the sector has tanked. What happened?
Patsky: It obviously has been a very difficult market overall in the beginning of 2008. In addition, our focus, particularly in our Winslow Green Growth Fund, is small-cap growth. And small-cap growth has been particularly under pressure..... You've seen stocks that run [up] the most come down the hardest, even if everything's fine in terms of fundamentals.
So is the green-energy boom over?
Hilton: I don't think so. If you look at the long-term trends that are supporting alternative energy, there's no doubt that this really is a good play.... There will be short-term volatility. But if you look at things like the price of oil, the amount of new investing that's going into promoting new companies in this space, all the potential climate-change legislation that we're seeing, this really does create a perfect long-term [opportunity] for this sector....MORE
From MIT's Technology Review:
How the Chinese plan to modify the weather in Beijing during the Olympics, using supercomputers and artillery.
To prevent rain over the roofless 91,000-seat Olympic stadium that Beijing natives have nicknamed the Bird's Nest, the city's branch of the national Weather Modification Office--itself a department of the larger China Meteorological Administration--has prepared a three-stage program for the 2008 Olympics this August.
First, Beijing's Weather Modification Office will track the region's weather via satellites, planes, radar, and an IBM p575 supercomputer, purchased from Big Blue last year, that executes 9.8 trillion floating point operations per second. It models an area of 44,000 square kilometers (17,000 square miles) accurately enough to generate hourly forecasts for each kilometer.
Then, using their two aircraft and an array of twenty artillery and rocket-launch sites around Beijing, the city's weather engineers will shoot and spray silver iodide and dry ice into incoming clouds that are still far enough away that their rain can be flushed out before they reach the stadium.Finally, any rain-heavy clouds that near the Bird's Nest will be seeded with chemicals to shrink droplets so that rain won't fall until those clouds have passed over. Zhang Qian, head of Beijing's Weather Modification Office, explains, "We use a coolant made from liquid nitrogen to increase the number of droplets while decreasing their average size. As a result, the smaller droplets are less likely to fall, and precipitation can be reduced.">>>MORE
UPDATE II: We have a lot of posts on Iceland, use the 'Search blog' box, keyword Iceland.
UPDATE: 29Sep08, HERE
(turn down the volume, we've got Led Zeppelin pasted in)
This Financial Times story reminded me of a comment on a MarketBeat post.
From the FT:
Concern for Iceland grows after rate rise
Fears that Iceland could be the first country to fall victim of the global financial turmoil grew on Tuesday when its central bank abruptly increased interest rates 1.25 percentage points to 15 per cent in an attempt to restore confidence in its struggling currency and stave off a full-blown economic crisis.
The bank said “deteriorating financial conditions in global markets” had contributed to the emergency move. Confidence in the krona, Iceland’s currency, has been shattered this year because of perceived economic imbalances in the economy and fears the banking sector is in danger of collapse. The krona has weakened by 22 per cent against the euro so far this year.The rapid weakening of the currency prompted the central bank to adopt unusually blunt language on Tuesday, warning if the decline was not reversed Iceland faced “spiralling increases in prices, wages and the price of foreign exchange”....MORE
The MarketBeat post: March 20, 2008, 4:46 pm
...People tend to worry about some far-off corner of the world causing a 20-car pile-up in the global financial system, after the Asia-led currency crises that roiled markets back in 1997. Fearful types these days are looking at Iceland, where inflation is high, the currency has been stomped of late, and it has a large current account deficit. Speculation about bank failures has investors putting big bets on default in the credit-default swaps market.And comment:
Iceland is cold.
Comment by Climateer - March 20, 2008 at 5:24 pmHere's Financial Crookery:
...My example du jour is a Close Asset Management product: Japanese Accelerated Return Fund II (JAC.L). Beneath this exhilarating name hides a payoff profile which is essentially a 180 pence maximum less a 5x geared put spread on the Nikkei expiring in 2012. All well and good; the Nikkei's performance since launch may be poor, but at least investors know how the linkage works.
Where it gets interesting is that the 180 pence maximum is secured on a pool of bonds. Two of these bonds, or 33% of the gross assets of the investment, are issued by the Icelandic banks Glitnir and Kaupthing (who? who indeed). Yet the formal valuations of the bonds at 31 Dec 2007 implied these Icelandic behemoths have virtually the same credit risk as, for example, Royal Bank of Scotland....
From the Telegraph:
A hedge fund based in London set up a "dirty-tricks unit" to manipulate share prices and get illicit information on companies in an attempt to make millions on the stock market, an insider has revealed.
As the official hunt began for the rogue traders who tried to bring down Britain's biggest mortgage lender, HBOS, The Daily Telegraph can reveal a whistle-blower's account of how a multi-billion pound fund allegedly used illegal tactics to drive down stock prices.
Private detectives were allegedly employed to hack into executives' emails and telephone records.
Front companies were set up to allow the hedge fund traders to pose as independent researchers or journalists.
Negative information on companies was then distributed to leading investment banks in the hope that rumours would spread and some share prices would fall.
The hedge fund, which cannot be named for legal reasons, stood to make millions from "short-selling" the shares as they fell in value....MORE
That headline, "Revealed" reminded me of my two post fling with scandal headlines last year:
Darkest secrets, EXPOSED!
“Do you have a moment for the environment, sir?”
“No,” I barked as I evaded her, “I don’t!”...
Farm subsidies, EXPOSED!
Okay, I'll stop doing that.
I was at the Brooklyn Daily Eagle Online searchable database last night and absorbed some 1800's newspaper style/pacing. We'll switch to Readers Digest (modern).
"What do Ken Lay, Ted Turner, Sam Donaldson and David Rockefeller all have in common?"...
You could also make the case for hemi or semi.
Yesterday we relayed Solars: Cowen & Co positive (ENER, ESLR, FSLR, HOKU, SPWR, STP, and TSL.)
Right now FSLR is up $12.74 (6.08%).
Last September Cowen called for FSLR to outperform the S & P by 40%. I scoffed (having called a 22%, five day move in the stock a couple weeks before) and watched as it went from $107 to $283.
Both Lazard and Cowen have made some very timely calls on First Solar.
From the International Herald Tribune:
UK carbon credit trading company EcoSecurities Group PLC said its chief operating officer Adrian Fernando has bought 100,000 shares in the company, out of which, he purchased 75,000 shares at 100 pence each on March 19 and 25,000 shares at 95 pence each on March 20....MORE
Costlier corn flakes, pricier pizzas and painful pump fill-ups share more than top billing among consumers' worries.
They're all riding a roller coaster of commodity market prices, where peaks are unusually high. Like oil futures, agricultural futures have experienced dramatic highs and lows in recent months as Wall Street investors flock to commodities for protection from the falling dollar and slumping stocks.
But the ups and downs in futures prices are giving grain sellers and farmers financial vertigo. Instead of finding predictable prices for wheat, corn and other crops in futures markets, they're getting daily price jolts and no refuge from uncertainty.
That has prompted government regulators to examine what forces, if any, have thrown the markets off balance....MORE
From Living on Earth:
CURWOOD: Big business generates a lot of climate changing gases, but then, so do individuals. In the UK, 40 percent of CO2 emissions come from ordinary citizens who are the end users of fossil fuels. So there are several proposals to give plain folks some direct incentives to reduce their carbon waste. One option is a carbon tax – you use more, you pay more. Another idea would be carbon allowances that people could sell if they didn't use them. At the Tyndall Centre for Climate Change Research in England, Richard Starkey is working on a scheme called the Domestic Tradeable Quota. Each citizen would get a sort of carbon debit card that would record exactly how much fossil fuel they use for transport and in their home. Mr. Starkey joins me now from Manchester, England. Welcome to Living on Earth.
CURWOOD: This sounds a bit like Big Brother.
STARKEY: Well this is one of the objections that people make to this sort of idea. There would be this great big database, everybody would have an account in this database, and that the state would be able to know when you bought your gas, how much you bought, how much you paid. And obviously civil liberties in this country, as in the States, are very important. And so if a scheme like this was ever to be implemented, then there would have to be very stringent safeguards about how much data the government was able to collect on individuals and who was able to see that data. But I think you're absolutely right, any scheme like this, if it's going to work, has to be privacy friendly....MORE
If you recall, the British government began talking about this a couple years ago.
From The Guardian:
Swipe-card plan to ration consumers' carbon use
From The Independent:
Plan for 'credit cards' to ration individuals' carbon use
From The Telegraph:
Energy ration cards for everyone planned
From the Wall Street Journal:
Monsanto Co. boosted its fiscal 2008 earnings guidance for the third time in as many months, citing seed sales and gains made by its herbicide business.
The agribusiness giant now projects fiscal-year earnings of $3.15 to $3.25 a share, up 45 cents from last month's forecast.
It also sees fiscal second-quarter earnings of $1.75 a share, excluding a 23-cent gain related to former unit Solutia's bankruptcy. The mean estimates of analysts surveyed by Thomson Financial were for earnings of $1.35 for the quarter and $2.87 for the year....MORE
Thornburg Offers $1.35 Billion of Debt Paying 18%. AND: Junk Bond Losses Top $35 Billion, JPMorgan Sees
A couple stories from Bloomberg:
Thornburg Mortgage Inc., the ``jumbo'' mortgage specialist trying to stave off bankruptcy, jumped as much as 53 percent after disclosing plans to sell $1.35 billion of debt paying 18 percent interest.
Investors buying the senior notes will receive warrants that may equal 48 percent of the company's common shares, Santa Fe, New Mexico-based Thornburg said in a statement today. Thornburg is asking for New York Stock Exchange approval to issue the new securities without a shareholder vote. Waiting for that approval ``would seriously jeopardize the financial viability of the company,'' Thornburg said....MORE
High-yield, high-risk bonds are off to their worst start ever, and the biggest investors say there's no recovery in sight.
Junk bonds have fallen an average 3.9 percent this year, losing about $35 billion, according to data from Merrill Lynch & Co. indexes. Some funds managed by John Hancock Advisers LLC, OppenheimerFunds Inc. and Fidelity Investments are down more than 7 percent, showing that even the largest investors were caught off guard by the collapse....MORE
Monday, March 24, 2008
Three from MarketWatch:
Asian markets mostly advanced Tuesday, with Hong Kong and Australian shares soaring as trading resumed in both markets after an extended holiday weekend....MORE
Was the Dow's March 10 closing low of 11,740.15 the final low of the decline that began last fall?
A further drop in commodity prices is likely to bear down on the stocks of companies in sectors such as agriculture, mining machinery, energy equipment and alternative energy, said Citigroup on Monday....MORE
"I don't want it, why do you think I sold it to you"
-overheard when one trader tried to D.K. (don't know) a trade with another.
Forget lower interest rates. For the Federal Reserve to keep the financial markets from imploding it needs to buy troubled mortgage bonds from banks and securities firms, say the world's biggest Treasury investors.
Even after cutting rates by 3 percentage points since September, expanding the range of securities it accepts as collateral for loans and giving dealers access to its discount window, the Fed has been unable to promote confidence. The difference between what the government and banks pay for three- month loans almost doubled in the past month to 1.69 percentage points.
The only tool left may be for the Fed to help facilitate a Resolution Trust Corp.-type agency that would buy bonds backed by home loans, said Bill Gross, manager of the world's biggest bond fund at Pacific Investment Management Co. While purchasing some of the $6 trillion mortgage securities outstanding would take problem debt off the balance sheets of banks and alleviate the cause of the credit crunch, it would put taxpayers at risk.
``An RTC-type structure is interesting, and it may not be that much of a burden on taxpayers in the long run,'' said Barr Segal, a managing director at Los Angeles-based TCW Group Inc. who helps oversee $80 billion in fixed-income assets. The government should purchase the mortgages and reissue ``debt that's backed by the U.S. government and there you go, you've unclogged the drain,'' he said....MORE
I don't know whether to say "What could possibly go wrong?" or "Told ya so*" Hey! I just said both!
From an otherwise astounding Wall Street Journal story*:
Corrections & Amplifications:
China's annual pork consumption would increase by 11 billion pounds if China matched Taiwan's per-capita consumption rate. A previous version of this article incorrectly gave the figure as 11 million pounds.
Brings Supply Woes;
Slaking China's Thirst
AgFeed Industries, Inc is a NASDAQ Global Market listed (Stock Symbol: FEED) US public company headquartered in China. We are the largest premix feed company in China (as of the end of 2007) by revenues and intends to be the 2nd largest commercial hog producer by the total number of hogs produced annually upon completion of multiple hog farm acquisitions anticipated in April 2008. Our financial advisor is Deutsche Bank Securities, Inc.
Our 2008 sales and earnings guidance: Fllowing the completion of our $41 million financing advised by Deutsche Bank Securities in March 2008, we have provided our 2008 financial guidance as follows: revenues: $135 million; net income: between $30 million and $33 million; earnings per share (EPS): between $0.96 and $1.10 (fully diluted basis). As of March 1, 2008, we had 29,471,943 shares of common stock outstanding.
Google News for FEED
You've got to love a self-made billionaire named Bartmann.
Judging from the current state of the economy, with fears of a recession reigning supreme, now may not seem like the ideal time to start a new business.
But for Bill Bartmann, a serial entrepreneur who has had his fair share of scandal, nothing could be further from the truth. Sure there are risks to starting a new business, even during a healthy economy, but Bartmann said opportunities abound if you are willing to ignore the headlines that scream doom and gloom.
“When everyone is running to the exits the people that stand tall and firm almost always end up making a fortune,” said Bartmann. “If you’re not yet in a business this is the absolute prime time to get in.”>>>MORE
Here's the other Bartman:
Real name: Bart Simpson ("Who the hell are you?")
Other Aliases: Stretch Dude; Cupcake Kid
Group affiliation: The Bart Allegiance
Base of operations: The Bartcave
First appearance: [7F21] "Three Men and a Comic Book"
History: Inspired by Radioactive Man, his favorite comic book superhero, Bart Simpson took on the costumed identity of Bartman in order to confront Boffo Comics publisher Arnold Leach at the Springfield Comic Convention.
"Do the Bartman" is a song from The Simpsons' 1990 album The Simpsons Sing the Blues. The song leads off the album as the first track and the first single released from it.
Shonen Knife released a Japanese language cover of the song as a b-side on their 1992 CD single "Do the Knife".
Now that's obscure.
Ooh, the rentseekers aren't going to like this. Nope. Not gonna like this one bit. No siree.
Australia's farmers, coal miners and power generators should have to bid at auction for carbon permits when carbon trading starts in 2010, the government's top climate adviser said on Thursday.
Ross Garnaut, appointed by the government to help work out how to best introduce carbon trading, said giving major polluting industries free carbon permits would make no difference to the higher prices people would pay for energy or goods.
"Whether permits are allocated freely or auctioned to existing (electricity) generators, the price impact on households will be the same," Garnaut said in a discussion paper on Thursday....MORE
As Chairman of the Senate Committee on Banking, Housing and Urban Affairs are you sick unto death of these "capitalists of convenience"?
For example, what the hell is the mis-(mal) capitalized Fannie Mae doing paying out One Billion Four Hundred Million dollars in dividends on common stock?
This idea that it's okay to privatize the profits while socializing the potential losses is incomprehensible.
It seems to me that one of your aides might know the cell phone number of someone with the power and authority to shake some of these B.S. artists up a bit.
How 'bout the OFHEO throwing a ten-year clawback on stock and option grants?
I understand you need the GSE's to reliquify the system fast, before the public realizes that the emperors actually have no clothes, and start hunting bankers for sport, but when do we say enough is enough?
Here's a story from 24/7 Wall Street:
The Perverse Ethics Of Wall St., Countrywide (CFC) Refugees Turn Vultures
"There are no second acts in American lives"--F. Scott FitzgeraldSeveral former Countrywide (NYSE: CFC) executives are starting a new company, with the support of financial company Blackrock (NYSE: BLK) to buy troubled mortgages. These are, in all probability, the same managers who oversaw the subprime lending to people who could not afford their mortgages in the first place. It might appear to be irony, but it would be more appropriate to call it the kind of lapse in ethical behavior which so endears Wall St. to mainstream America....
Here's the rondo from Mozart's Horn Concerto No. 2.
Music to hunt bankers by.
Your climate change ideas were the most honest out of either party, what were you thinking?
Warning: You may want to put on your tin-foil hat.
Or, on the other hand, maybe it's time for a populist uprising* a la Jefferson:“Every generation needs a new revolution.”
The University of Virginia is a pretty good source on the old boy.
Or maybe: Toga Party.
From the D.C. Examiner:
Julian Robertson, the legendary hedge fund manager, has placed a big bet on the long-term decline of the U.S. economy. Additionally, Robertson is invested in the nuclear energy industry and in Chinese biofuels. He’s also launched an aggressive lobbying campaign to pass federal legislation instituting mandatory caps on greenhouse gas emissions.
Whether his enthusiastic backing of the Al Gore agenda of constricting fossil fuel use is a way to strengthen his bet against the U.S. economy, an effort to boost his nuclear or biofuels positions, or simply — as the media have put it — philanthropy, is hard to decipher.
But Robertson’s story and the debate over climate change policy reveals the enormous double standard in discussions of regulation and government control: While the anti-regulation side always has its motives questioned, the pro-regulation side is rarely subject to skepticism.
Big businesses have long been lobbying for federal restrictions on greenhouse gases. Enron, General Electric, DuPont, Goldman Sachs and many top energy companies have lobbied hard for “cap-and-trade” laws that would impose federal restrictions on greenhouse gas emissions by manufacturers and power plants, but allow firms to buy or sell excess emissions credits. In many of these cases, it’s easy to see the financial motive of these “socially responsible” corporations.>>>MORE
*With apologies to The Bard, "The first thing we do, let's kill all the rentseekers".
Pt. 1:The Memo All the Investment World Should Read
Everyone knows about the anticipation leading up to Warren Buffett’s annual shareholder letters. But for a certain Wall Street set, there are equally high expectations for the writings of Howard Marks. Marks is the chairman of Oaktree, the low-profile but powerful L.A-based firm that manages more than $50 billion in alternative investments, mostly in fixed-income strategies. He’s been writing memos to clients since 1990, but a cult following developed after a missive he penned on Jan. 1, 2000 titled “bubble.com.”>>>MORE
Pt. 2: Bull and Bear markets...
...To aid in your consideration of the future, I’ve formulated the converse of the above, the three stages of a bear market:
- the first, when just a few prudent investors recognize that, despite the prevailing bullishness, things won’t always be rosy,
- the second, when most investors recognize things are deteriorating, and
- the third, when everyone’s convinced things can only get worse.
Certainly we’re well into the second of these three stages. There’s been lots of bad news and writeoffs. More and more people recognize the dangers inherent in things like innovation, leverage, derivatives, counterparty risk and mark-to-market accounting. And increasingly the problems seem insolvable.
One of these days, though, we’ll reach the third stage, and the herd will give up on there being a solution. And unless the financial world really does end, we’re likely to encounter the investment opportunities of a lifetime. Major bottoms occur when everyone forgets that the tide also comes in. Those are the times we live for. [Emphasis his.]I've been thinking we'd see this happen three times in the current downturn. If the hypothesis is to be close to the mark, the March lows set the stage for the "credit crunch bounce" which would take us back toward the old highs, followed by recession I (2008) new lows, a second run back up and a final bottom around the time recession II is announced (2009).
See: Markets: I Scream, Triple Dip, from last week.
Remember this is just a working hypothesis and almost certainly won't come to pass as presented. Stay tuned.
From Oil & Gas Journal:
The American Petroleum Institute has launched the API Credit Exchange (ACE) in response to members' requests for help in meeting new federal laws that dramatically increase the amount of renewable fuels in gasoline supplies.
The secure, Internet-based system will allow market participants to identify buyers and sellers of renewable fuels credits, API said in announcing the program Mar. 19.
It said ACE will fulfill the trading requirements that the US Environmental Protection Agency established in September while implementing the 2005 Energy Policy Act's renewable fuels standard. Congress expanded that standard late last year as part of the 2007 Energy Independence and Security Act, API noted.
As part of that implementation, EPA set up a credit trading program to assure that the oil industry could comply with the RFS and still have the flexibility to meet domestic motor fuel needs. While ACE will be a clearinghouse for companies seeking trading partners, the actual credit trades will take place outside the system. Subscribers will pay an annual fee for the service....MORE
From the Wall Street Journal:
Old Pros Size Up the Game
Of Over-Betting, How to Play the Bond Market
About 50 years ago, a young math instructor at the Massachusetts Institute of Technology, Edward Thorp, created a strategy for wagering on blackjack that maximized winnings and effectively eliminated the chance of getting wiped out.
The strategy involved getting an edge over the dealer by counting cards, and never making especially big bets. He described the method in a 1962 book, "Beat the Dealer," then took on Wall Street in "Beat the Market."
Mr. Thorp ran two hedge funds, Princeton-Newport Partners and Ridgeline Partners, which went nearly 30 years without a down year, and averaged 19%-20% annual returns, he says.
One of his followers became Bill Gross, managing director of Allianz SE's giant bond-fund company, Pacific Investment Management Co., or Pimco. He read the books in college and still uses the risk-management techniques.
The Bear Stearns debacle shows that managing risk is more important than ever. Messrs. Gross and Thorp talked about risk management and markets -- and cards, of course -- in an interview at Pimco's Newport Beach, Calif., base:
Wall Street Journal: How did you get interested in blackjack?
Edward Thorp: I went to Las Vegas in 1958. I'd learned a strategy that would let you play just about even, so I decided to play with $10. My $10 lasted a lot longer than anyone else's at the table. I thought there had to be a mathematical way to beat the game, and that would be interesting mathematics. I figured it out and a few years later I wrote "Beat the Dealer."
WSJ: What about you, Bill?
Bill Gross: I picked up Ed's book in early 1966. I got in an automobile accident and had to go into the hospital and had time to practice the card-counting technique he discovered. And it worked! I had $200, so I headed out to Las Vegas. I turned my $200 into $10,000. I didn't care about the money. I wanted to prove that you could beat the system. Then I thought about what I could do that takes the same skills. I realized it was investing.
Mr. Thorp: He started out with $200 and now he manages nearly $1 trillion.
Mr. Gross: "Beat the Market" was even more fortuitous -- it was the reason I got hired at Pimco, or what was Pacific Mutual Life then. I had done a master's thesis on convertible bonds and "Beat the Market." The people who hired me said, 'We have a lot of smart candidates, but this guy is interested in the bond market.' So I got my job because of Ed.
WSJ: What can your blackjack strategy tell us about how to manage risk in today's markets?>>>MORE
HT: Abnormal Returns
Gambler's ruin is a concept in statistics that is critical for the blackjack player to know and essential for most other situations where you are putting money at risk, it is also useful in population studies, it can be used to predict extinctions.
The basic meaning of gambler's ruin is a gambler's loss of the last of his bank of gambling money and consequent inability to continue gambling. In probability theory, the term sometimes refers to the fact that a gambler will almost certainly go broke in the long run against an opponent with much more money, even if the opponent's advantage on each turn is small or zero....Google Scholar returns 944 hits for "Gamblers ruin", I thought there would be thousands.